Labor & Employment Law

Dan Rather's Wrongful Termination Suit Against CBS is Dismissed Pursuant to "Pay or Play" Clause

Dan Rather was famously terminated following his 2004 "60 Minutes II" report which used forged documents to accuse George W. Bush of evading military service.   And a New York State Appellate Court has just dismissed the last remnants of Rather's wrongful termination lawsuit against the network.

After the 2004 scandal, CBS had continued to pay Rather's $6 million salary even while it stopped using his services for any on-air broadcasts.  Once he was formally terminated in June 2006, CBS accelerated and paid the remaining five-months of compensation due under the term of the contract. 

Rather claimed, however, that if he were not utilized as the CBS Evening News anchor his contract required CBS to reassign him to actual broadcast stories on 60 Minutes or 60 Minutes II.  The Appellate Court disagreed.  It held that the contract's "pay or play" clause clearly allowed the network to keep him off the air so long as it continued to pay the compensation due under the contract.

Rather claims that, in effect, CBS "warehoused" him, and that, when he was finally terminated and paid in June 2006, CBS did not compensate him for the 15 months "when he could have worked elsewhere." This claim attempts to gloss over the fact that Rather continued to be compensated at his normal CBS salary of approximately $6 million a year until June 2006 when the compensation was accelerated upon termination, consistent with his contract.

Contractually, CBS was under no obligation to "use [Rather's] services or to broadcast any program" so long as it continued to pay him the applicable compensation. This "pay or play" provision of the original 1979 employment agreement was specifically reaffirmed in the 2002
Amendment to the employment agreement.
 

The Court also dismissed Rather's final claim that CBS breached a fiduciary duty on the ground that "employment relationships do not create fiduciary relationships."   

Full post as published by California Labor & Employment Defense Blog on October 05, 2009 (boomark / email).